Seimas launched debate on the State Budget for 2018

The Seimas launched the debate on the draft Law on Approving the Financial Indicators of the State Budget and Municipal Budgets for 2018. (No XIIIP-1227) introduced by Vilius Šapoka, Minister of Finance. The draft focuses on poverty reduction, ensuring national security, promotion of entrepreneurship and productive investment, as well as greater municipal budgets and higher financial autonomy.

It is estimated that governmental revenues will comprise almost EUR 16.082 billion, whereas governmental expenditure will amount to nearly EUR 15.839 billion. This will be the first non-deficit budget since the restoration of Lithuania’s independence.

The draft submits for approval over EUR 9.074 billion in state budget revenues and almost EUR 9.542 billion in expenditure. Appropriations exceed revenues by EUR 467.3 million.

The EU appropriations and other international financial support for 2018 is estimated at EUR 2 116.3 million, which is only slightly higher if compared to 2017. The increase is around EUR 15 million.

In 2018, GDP growth will account for 2.9% with the average annual inflation of 2.7%. 2018 will witness a growth of average gross monthly salary by 6.2% and a fall in unemployment rate to 6.4%.

In relation to the key changes in the tax system, the Minister of Finance emphasized that with a view to poverty reduction, tax-exempt threshold will be increased from EUR 310 to EUR 380 and the minimal monthly salary will rise to EUR 400. Persons with working capacity level of 30–55% will enjoy a tax-exempt threshold of EUR 390 and those with working capacity of 0–25% will have a tax-exempt threshold of up to EUR 450. This is to ensure that people with the lowest salaries and the disabled pay less tax.

The Additional tax-exempt threshold will be abolished and a 30 euro monthly child benefit for every child, irrespective of family income, will be introduced instead. Additional child benefits will be paid for three or more children, irrespective of family income, and for one or two children when family income per member is lower than EUR 183. The Additional child benefit will amount to EUR 28.5 for children under the age of two and EUR 15.2 for children from 2 to 18 years of age.

In addition, Vilius Šapoka explained that monthly retirement pensions will increase by EUR 63 if compared to 1 January 2017. Over EUR 370 million is intended for pension increase. The Minister reminded that monthly pensions had grown by the average of EUR 20 since January this year. An average increase by EUR 13 is planned since October and an additional growth by EUR 30 is to be seen since next year.

In 2018, Lithuania will fulfil its obligations to NATO and will allocate 2% of its GDP to national defence. Thus national defence will benefit from EUR 963 million, which is double to the amount allocated in 2015.

In order to improve the health care, the budget of the compulsory health insurance fund will experience a rise of EUR 173 million. The Minister of Finance believes that it will enable salary increase for medical staff, financing of new treatment services that have not been compensated for before, and greater availability of health care services, medicines and medical aid tools, as well as rehabilitation and prevention.

Vilius Šapoka emphasized that EUR 164 million will be allocated for business incentives and innovation. ‘It is estimated that companies which invest in technological innovation will be able to reduce their taxable profit by 100%. A 5% tax rate is planned for commercialisation. Corporate tax and social contribution holidays will be given for business start-ups,’ the Minister said.

Compared to the pre-crisis period, funding for culture has experienced a 55.4% increase. It will be EUR 28.8 million larger in 2018 than in 2017. The culture pass will be introduced next year. This is a programme aimed at enabling free access for school pupils to theatre, cinema, concerts and museums, thus encouraging them to enjoy culture, and at educating active users of culture. In 2018, the culture passes will be handed out to 1–4 year school pupils, making it a pilot project, with a view to extending them to 5–8 and 9–12 year school pupils in 2019, the Ministry of Finance said.

Twenty million euro will be allocated for salary increase for teachers, who will be paid for at a different rate, while EUR 22.6 million will be intended to increase salaries for university teachers and research associates. Moreover, the funding of informal education for children will receive additional EUR 4 million and additional EUR 5 million will be allocated for free bachelor studies of subjects in demand by the state.

After the submission, the budget will be deliberated on as prescribed by the Statute of the Seimas. The Committee on Budget and Finance was appointed as the lead committee and the remaining committees of the Seimas as additional committees. Preliminarily, the first deliberation will begin at the sitting of the Seimas on 23 November 2017. The second deliberation is planned for 7 December 2017.